U.S. International Tax Navigator

🎧 Listen to more in-depth episodes on Spotify! Interactive Guide to U.S. International Tax (2025)

The 2025 International Tax Overhaul

A strategic guide to the new landscape shaped by the "One Big Beautiful Bill Act of 2025." This tool helps you understand the critical changes to GILTI (now NCTI), FDII (now FDDEI), and other core regimes to optimize your global tax strategy.

Outbound Incentives & Key Regimes

NCTI & FDDEI: Interactive Impact Analysis

The 2025 law raises effective tax rates on foreign and export income. Use the toggle and inputs below to see how the changes affect your bottom line.

NCTI (formerly GILTI) Calculator

1. Participation Exemption (100% DRD)

Repatriate profits from foreign subsidiaries (10%+ owned) to the U.S. completely tax-free via a 100% dividends-received deduction. This is the core of the U.S. territorial system.

✔️ Frees up global cash for U.S. reinvestment.

2. Enhanced Foreign Tax Credit

To mitigate the higher NCTI tax rate, the allowable credit for foreign taxes paid has been increased. You can now claim a credit for **90%** of foreign taxes paid on NCTI income, up from 80% previously.

✔️ Reduces the "haircut" and lowers residual U.S. tax.

3. IC-DISC Export Incentive

For exporters of U.S.-made goods, this structure converts ordinary income into lower-taxed qualified dividends for shareholders.

✔️ A permanent tax rate arbitrage opportunity.

Compliance & Anti-Abuse Regimes

BEAT (Base Erosion Tax)

This minimum tax prevents earnings stripping via deductible payments to foreign affiliates. The 2025 law provides certainty by making the rate a permanent **10.5%**, avoiding a scheduled increase to 12.5%.

10.5%
Permanent BEAT Rate

Transfer Pricing (IRC §482)

All transactions between affiliated companies must meet the "arm's-length" standard. Preparing a robust transfer pricing study is not just for compliance—it's a key strategy to avoid substantial penalties.

🔎 **Benefit:** Penalty protection via contemporaneous documentation.

Subpart F & CFC Look-Through

Subpart F continues to target passive and related-party income. The 2025 law permanently extends the "CFC look-through rule," which is a crucial exception that simplifies intercompany transactions between foreign subsidiaries.

🤝 **Benefit:** Certainty for structuring global operations.

Inbound Investment: U.S. Tax Rules

Taxation of U.S. Source Income

Foreign persons and corporations are taxed differently depending on the type of income earned in the U.S. Understanding the distinction between business and investment income is critical.

Business Income (ECI)

Income "effectively connected" to a U.S. trade or business is taxed on a **net basis** at standard U.S. corporate rates (21%).

Investment Income (FDAP)

Passive income like dividends and royalties is subject to a **30% gross withholding tax**, unless reduced by a treaty.

Withholding on dividends could be 30%.

Anti-Inversion Rules

Strict rules prevent U.S. companies from reorganizing under a foreign parent simply to avoid U.S. tax. Consequences depend on post-inversion ownership.

Shareholder Ownership ≥ 80%

Result: New foreign parent is treated as a U.S. corp.

Shareholder Ownership 60% - 79%

Result: Respected as foreign, but key tax benefits are denied.

© 2025 International Tax Navigator. For educational and illustrative purposes only.

Based on the provisions of the fictional "One Big Beautiful Bill Act of 2025." Always consult a qualified tax professional.

COCOMOCPA

Financial Controller / CPA

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